Hua Medicine Subsidiary Huaaotai Biopharma Files for IPO Following RMB 2B Debt-to-Equity Investment at RMB 3.5B Pre-Money Valuation

PharmaCircleMonitoring shows:Huahai Pharmaceutical Co., Ltd. Announces Capital Increase in Controlling Subsidiary Through Debt-to-Equity Conversion

The board of directors and all directors of the company guarantee that there are no false records, misleading statements, or significant omissions in the content of this announcement, and assume individual and joint responsibility for the authenticity, accuracy, and completeness of its content.

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Huahai Pharmaceutical Co., Ltd. (hereinafter referred to as "Huahai Pharmaceutical" or "the Company") plans to increase the capital of its holding subsidiary, Shanghai Huaota Biopharmaceutical Co., Ltd. (hereinafter referred to as "Huaota"), by converting a RMB 20 billion debt corresponding to Huaota into equity. The Company will subscribe to an additional RMB 182,857,143 registered capital, equivalent to 182,857,143 new shares in Huaota.

This capital increase has been reviewed and approved by the sixth meeting of the ninth session of the company's Board Audit Committee, the third meeting of the ninth session of the Board Development Strategy Committee, and the first meeting of the ninth session of the Board of Directors. It does not need to be submitted to the shareholders' meeting for review. This capital increase does not constitute a related party transaction, nor does it constitute a major asset reorganization as defined by the Measures for the Administration of Major Asset Restructuring of Listed Companies.

After the completion of this capital increase, Huaota will remain a subsidiary within the consolidated financial statements of the company, and the company's direct shareholding percentage in it will increase from 79.69% to 87.07%.

This capital increase, while effectively reducing the overall debt scale of Huaota and improving its financial situation to a certain extent, does not directly bring funds to Huaota. In the future production and operation process, Huaota may be affected by factors such as the macro economy, industry environment, and market competition. Its operating conditions and revenue are uncertain. Investors are advised to be mindful of investment risks.

1. Overview of This Capital Increase

(I) Overview of This Capital Increase

To support the business development of its holding subsidiary Huaota and optimize its asset-liability structure, Huahai Pharmaceutical Co., Ltd. plans to increase capital in Huaota by converting a RMB 20 billion debt held against Huaota into equity. The company will subscribe to an additional RMB 182,857,143 registered capital of Huaota, equivalent to 182,857,143 shares. The registered capital of Huaota will increase from RMB 320 million to RMB 502,857,143.

The minority shareholders of Huaota, Linhai Huahai Investment Management Partnership (Limited Partnership) (hereinafter referred to as "Huahai Investment") and Linhai Haijing Venture Capital Partnership (Limited Partnership) (hereinafter referred to as "Haijing Ventures"), will not participate in this pro-rata capital increase. After the completion of this capital increase, Huaota will remain a controlled subsidiary of the company, and the scope of the company’s consolidated financial statements will not change. This capital increase does not constitute a related party transaction, nor does it constitute a major asset restructuring as defined by the Measures for the Administration of Major Asset Restructuring of Listed Companies.

(II) Deliberation Status: According to the relevant regulations such as the "Listing Rules of the Shanghai Stock Exchange" and the "Articles of Association of the Company," this transaction has been reviewed and approved at the sixth meeting of the Audit Committee, the third meeting of the Development Strategy Committee, and the first meeting of the Ninth Board of Directors. This transaction falls within the deliberation authority of the company's board of directors and does not need to be submitted to the shareholders' meeting for review.

II. Basic Information of the Capital Increase Target

Huaota Finance

III. Pricing of This Capital Increase

According to the asset appraisal report (Report No. Kunyuan Pingbao [2026] 360) issued by Kunyuan Asset Appraisal Co., Ltd. regarding the "Asset Appraisal Project for the Relevant Creditor's Rights Involved in Zhejiang Huahai Pharmaceutical Co., Ltd.'s Proposed Debt-to-Equity Swap," as of March 31, 2026, based on the appraisal assumptions disclosed in the appraisal report, the appraised value of the creditor’s rights assets entrusted by Huahai Pharmaceutical is RMB 20 billion. Based on these appraisal results, the company subscribed for newly issued shares of Huaota using its held creditor’s rights amounting to RMB 20 billion at a valuation of RMB 20 billion.

According to the assessment report (Kunyuan Evaluation Report [2026] No. 321) on the entire equity value of shareholders of Shanghai Huaota Biopharmaceutical Co., Ltd. for its proposed equity structure adjustment, issued by Kunyuan Assets Evaluation Co., Ltd., as of November 30, 2025, the assessed value of the entire equity of Huaota's shareholders is RMB 35,012.55 million. The pricing of this capital increase is based on these evaluation results, and after friendly negotiations among all parties, the pre-investment valuation of Huaota for this capital increase has been determined to be RMB 35 billion.。    

IV. Main Terms of the Capital Increase Agreement (1) Parties to the Agreement Party A: Huahai Pharmaceutical Party B: Haizheng Venture Capital Party C: Huahai Investment Party D: Huaota (2) This Capital Increase All parties to the agreement unanimously agree that upon completion of this capital increase, the total number of shares in Huaota is proposed to be changed to 502,857,143 shares. The additional 182,857,143 shares will be subscribed by Huahai Pharmaceutical using its held debt principal corresponding to Huaota, amounting to RMB 2 billion, valued at RMB 2 billion based on assessment; among which RMB 182,857,143 will be counted towards Huaota's registered capital and RMB 1,817,142,857 will be counted towards Huaota’s capital reserve. Huaota and Huahai Pharmaceutical should conduct the closing within two working days after the agreement takes effect. On the closing date, Huaota will issue a shareholder register reflecting the relevant changes from this capital increase to Huahai Pharmaceutical. All parties shall actively cooperate to complete the corresponding industrial and commercial change registration within 30 days from the closing of this capital increase. (3) Liability for Breach of Contract All parties shall strictly abide by this agreement. In case of any breach of contract by any party, unless otherwise agreed, the breaching party shall bear the losses incurred to the non-breaching party. (4) Effectiveness of the Agreement The agreement shall come into existence as of the date when the legal representatives or authorized representatives of each party sign and affix their respective official seals, and it shall take effect as of the date when matters related to this capital increase have been deliberated and passed by the board of directors of Huahai Pharmaceutical and the shareholders’ meeting of Huaota.

V. Impact of this capital increase on the companyThe company's debt-to-equity conversion and capital increase in Huaota this time is to support its long-term development and optimize its capital structure. After the implementation of this debt-to-equity conversion and capital increase, it will not change the scope of the company's consolidated financial statements, will not bring adverse effects to the company's normal production and operation, and will not harm the interests of the company and its shareholders.

VI. Risk Warning Although this capital increase can effectively reduce the overall debt scale of Huaota and improve its financial situation to a certain extent, it cannot directly bring funds to Huaota. In the future production and operation process, Huaota may be affected by factors such as the macro economy, industry environment, and market competition. Its operating conditions and income are uncertain. We sincerely remind all investors to invest rationally and pay attention to investment risks.

This is to announce. Board of Directors of Zhejiang Huahai Pharmaceutical Co., Ltd. April 29, 2026

References:

PharmCube Data;

http://www.marketscreener.com；

https://www.businesswire.com；

www1.hkexnews.hk/；

https://www.biotechtv.com/post；

https://www.prnewswire.com；

https://pdf.dfcfw.com/pdf/H2_AN202604291821756808_1.pdf?1777486932000.pdf；

; etc.